Q2 2026 Solstice Advanced Materials Inc Earnings Call

July 30, 2026

Speaker #1: Greetings, and welcome to the Solstice Advanced Materials Q2, 2026 earnings conference call. At this time, all participants are enlisted in only mode. A question and answer session will follow the formal presentation.

Operator: Greetings, welcome to the Solstice Advanced Materials Q2 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. You may be placed into the question queue at any time by pressing star one on your telephone keypad. We ask you to please limit yourselves to one question and one follow-up, then return to the queue. As a reminder, this conference is being recorded. If anyone should require operator assistance, please press star zero. It is now my pleasure to turn the call over to Mike Leithead, Vice President, Investor Relations. Mike, please go ahead.

Speaker #1: You may be placed into question queue at any time by pressing star one on your telephone keypad. We ask that you please limit yourselves to one question and one follow-up, then return to the queue.

Speaker #1: As a reminder, this conference is being recorded. If anyone should require operator assistance, please press star zero. It's not my pleasure to turn the call over to Mike Leadhead, Vice President of Investor Relations.

Operator: As a reminder, this conference is being recorded. If anyone should require operator assistance, please press star zero. It is now my pleasure to turn the call over to Mike Leithead, Vice President, Investor Relations. Mike, please go ahead.

Speaker #1: Mike, please go ahead.

Speaker #2: Thank you, and good morning, everyone. Welcome to Solstice's second quarter, 2026 earnings call. We released our second quarter, 2026 financial results earlier this morning.

Mike Leithead: Thank you, and good morning, everyone. Welcome to Solstice's Q2 2026 earnings call. We released our Q2 2026 financial results earlier this morning. Today's presentation, including non-GAAP reconciliations and our earnings press release, are available on the investor relations portion of Solstice's website at investor.solstice.com. Our discussion today will include forward-looking statements that are based on our best view of the world and our businesses as we see them today and are subject to risks and uncertainties, including the ones described in our SEC filings. This includes statements regarding our pending acquisition of Element Solutions. Please see the additional disclosure in this morning's materials and our related SEC filings. Joining me today are David Sewell, our President and CEO, and Tina Pierce, our CFO.

Speaker #2: Today's presentation—including non-GAAP reconciliations, and our earnings press release—are available on the Investor Relations portion of Solstice's website, at investor.solstice.com. Our discussion today will include forward-looking statements that are based on our best view of the world and our businesses as we see them today, and our subject to risks and SEC filings.

Mike Leithead: Our discussion today will include forward-looking statements that are based on our best view of the world and our businesses as we see them today and are subject to risks and uncertainties, including the ones described in our SEC filings. This includes statements regarding our pending acquisition of Element Solutions. Please see the additional disclosure in this morning's materials and our related SEC filings. Joining me today are David Sewell, our President and CEO, and Tina Pierce, our CFO.

Speaker #2: This includes statements regarding our pending acquisition of Element Solutions. Please see the additional disclosure in this morning's materials and our related SEC filings. Joining me today are David Sewell, our President and CEO, and Tina Pierce, our CFO.

Speaker #2: David will open today's call with highlights of our second quarter results. Tina will then review our segment performance and financial outlook. We'll be returning the call back to David for closing remarks.

Mike Leithead: Tina will review our segment performance and financial outlook before turning the call back to David for closing remarks. We will be happy to take your questions. With that, I'll now turn the call over to David.

Mike Leithead: David Sewell will open todays call with highlights of our Q2 results. Tina Pierce will review our segment performance and financial outlook before turning the call back to David Sewell for closing remarks. We will be happy to take your questions. With that, I'll now turn the call over to David Sewell.

Speaker #2: We will then be happy to take your questions. With that, I'll now turn the call over to David.

Speaker #3: Thank you, Mike. And thank you, everyone, for joining us today. During the second quarter, Solstice Advanced Materials again delivered strong top and bottom-line results, reflecting ongoing robust demand trends across several of our key businesses, including nuclear energy, electronic materials, refrigerants, and healthcare packaging.

David Sewell: Thank you, Mike, and thank you, everyone, for joining us today. During Q2, Solstice Advanced Materials again delivered strong top-and-bottom-line results, reflecting ongoing robust demand trends across several of our key businesses, including nuclear energy, electronic materials, refrigerants, and healthcare packaging. In fact, six of our seven businesses grew this quarter, four of them at double-digit rates. I want to take a moment to thank our entire Solstice team, whose execution this quarter speaks for itself. This performance demonstrates the strength of Solstice's portfolio, not only through our transition to a standalone company, but also in a dynamic macroeconomic environment. This quarter, that resilience showed up in sound execution through macroeconomic volatility, a heavier slate of planned plant turnarounds, and a largely complete exit of our TSAs.

Speaker #3: In fact, six of our seven businesses grew this quarter, four of them at double-digit rates. I want to take a moment to thank our entire Solstice team whose execution this quarter speaks for itself.

David Sewell: I want to take a moment to thank our entire Solstice team, whose execution this quarter speaks for itself. This performance demonstrates the strength of Solstice's portfolio, not only through our transition to a standalone company, but also in a dynamic macroeconomic environment. This quarter, that resilience showed up in sound execution through macroeconomic volatility, a heavier slate of planned plant turnarounds, and a largely complete exit of our TSAs.

Speaker #3: This performance demonstrates the strength of Solstice's portfolio. Not only through our transition to a standalone company, but also in a dynamic, macroeconomic environment. This quarter, that resilience showed up in sound execution through macroeconomic volatility, a heavier slate of planned plant turnarounds, and a largely complete exit of our transition service agreements.

Speaker #3: Our specialty materials assets and balance sheet strength continue to set us apart in this industry. Allowing us to reinvest in growth at a time when many in the industry have needed to pare back.

David Sewell: Our specialty materials assets and balance sheet strength continue to set us apart in this industry, allowing us to reinvest in growth at a time when many in the industry have needed to pare back. We continue to invest in compelling growth areas aligned with our strategic priorities, such as our electronic materials, safety and defense solutions, and nuclear businesses, consistent with what we believe are attractive long-term outlooks for demand. That investment spans both CapEx and increased R&D spending as we advance the next generation of critical molecules for our customers. Together with our announced acquisition of Element Solutions, these high-return organic investments mark a clear acceleration of our growth strategy. We generated $461 million of operating cash in H1, supported by disciplined working capital management, cash generation that funds our growth investments, and supports returning cash to shareholders through our recently declared quarterly dividend.

Speaker #3: We continue to invest in compelling growth areas aligned with our strategic priorities, such as our electronic materials, safety and defense solutions, and nuclear businesses, consistent with what we believe are attractive, long-term outlooks for demand.

Speaker #3: That investment spans both CapEx and increased R&D spending, as we advance the next generation of critical molecules for our customers. Together with our announced acquisition of Element Solutions, these high-return organic investments mark a clear acceleration of our growth strategy.

David Sewell: That investment spans both CapEx and increased R&D spending as we advance the next generation of critical molecules for our customers. Together with our announced acquisition of Element Solutions, these high-return organic investments mark a clear acceleration of our growth strategy. We generated $461 million of operating cash in H1, supported by disciplined working capital management, cash generation that funds our growth investments, and supports returning cash to shareholders through our recently declared quarterly dividend.

Speaker #3: We generated $461 million of operating cash in the first half, supported by disciplined working capital management, cash generation that funds our growth investments, and supports returning cash to shareholders through our recently declared quarterly dividend.

Speaker #3: The strong cash generation of our business is what gives us confidence in the rapid deleveraging of net debt to less than three times EBITDA that we anticipate within 18 months, following the close of the Element Solutions acquisition.

David Sewell: The strong cash generation of our business is what gives us confidence in the rapid de-leveraging of net debt to less than three times EBITDA that we anticipate within 18 months following the close of the Element Solutions acquisition. With our strong H1 performance and continued momentum across the business, we are raising our full year 2026 guidance even against an uncertain macroeconomic backdrop. Turning to slide four, I'd like to briefly update you on our acquisition of Element Solutions, which we announced on 6 July. This combination represents a significant acceleration of our strategy to build an industry-leading advanced materials platform with increased exposure to high-growth electronics, AI infrastructure, and other attractive end markets. The same secular trends powering our results this quarter include artificial intelligence, data centers, semiconductor manufacturing, and thermal management are precisely what makes this combination so compelling.

Speaker #3: With our strong first-half performance and continued momentum across the business, we are raising our full-year 2026 guidance even against an uncertain macroeconomic backdrop. Turning to slide 4, I'd like to briefly update you on our acquisition of Element Solutions which we announced on July 6.

David Sewell: Turning to slide four, I'd like to briefly update you on our acquisition of Element Solutions, which we announced on 6 July. This combination represents a significant acceleration of our strategy to build an industry-leading advanced materials platform with increased exposure to high-growth electronics, AI infrastructure, and other attractive end markets. The same secular trends powering our results this quarter include artificial intelligence, data centers, semiconductor manufacturing, and thermal management are precisely what makes this combination so compelling.

Speaker #3: This combination represents a significant acceleration of our strategy to build an industry-leading advanced materials platform, with increased exposure to high-growth electronics, AI infrastructure, and other attractive end markets.

Speaker #3: The same secular trends powering our results this quarter include artificial intelligence, data centers, semiconductor manufacturing, and thermal management are precisely what makes this combination so compelling.

Speaker #3: Together, we believe we will be better positioned to serve electronics, and AI infrastructure customers from early-stage development through high-volume manufacturing, while our refrigerant solutions—including data center cooling and our specialty positions such as nuclear—remain core to the combined company.

David Sewell: Together, we believe we will be better positioned to serve electronics and AI infrastructure customers from early-stage development through high-volume manufacturing, while our refrigerant solutions, including data center cooling and our specialty positions such as nuclear, remain core to the combined company. The logic here is grounded in what you are already seeing in our results. The customer expansion, secular demand, and technical capability that are foundational to the strength of our business. Solstice and Element are a natural fit, not only because we support similar customer environments, but because our complementary strengths. When you combine our chemistry expertise with Element's formulation capabilities, you get what we expect to be a leading platform for innovation that will fuel the development of next generation solutions.

Speaker #3: The logic here is grounded in what you are already seeing in our results. The customer expansion secular demand and technical capability that are foundational to the strength of our business.

David Sewell: The logic here is grounded in what you are already seeing in our results. The customer expansion, secular demand, and technical capability that are foundational to the strength of our business. Solstice and Element are a natural fit, not only because we support similar customer environments, but because our complementary strengths. When you combine our chemistry expertise with Element's formulation capabilities, you get what we expect to be a leading platform for innovation that will fuel the development of next generation solutions.

Speaker #3: Solstice and Element are a natural fit. Not only because we support similar customer environments, but because our complementary strengths. When you combine our chemistry expertise with Element's formulation capabilities, you get what we expect to be a leading platform for innovation that will fuel the development of next-generation solutions.

Speaker #3: With Element, we believe we will also be positioned to collaborate with customers early in their project lifecycles to develop solutions purpose-built to support their objectives.

David Sewell: With Element, we believe we will also be positioned to collaborate with customers early in their project life cycles to develop solutions purpose-built to support their objectives. The synergies we outlined in our investor materials about the transaction build directly on those drivers, which is why we have confidence in the value this creates. The transaction remains subject to shareholder and regulatory approvals and other customary closing conditions, and we expect it to close in H1 of 2027. We are very excited about what our two companies can build together. Turning to slide five, I'd like to discuss our Q2 2026 consolidated results. In Q2 of 2026, Solstice recorded $1.148 billion in net sales, up 11% year over year, which exceeded the top end of the guidance we provided for the quarter.

Speaker #3: The synergies we outlined in our investor materials about the transaction-build-directly on those drivers, which is why we have confidence in the value this creates.

Speaker #3: The transaction remains subject to shareholder and regulatory approvals and other customary closing conditions, and we expect it to close in the first half of 2027.

David Sewell: The transaction remains subject to shareholder and regulatory approvals and other customary closing conditions, and we expect it to close in H1 of 2027. We are very excited about what our two companies can build together. Turning to slide five, I'd like to discuss our Q2 2026 consolidated results. In Q2 of 2026, Solstice recorded $1.148 billion in net sales, up 11% year over year, which exceeded the top end of the guidance we provided for the quarter.

Speaker #3: We are very excited about what our two companies can build together. Turning to slide 5, I'd like to discuss our second-quarter 2026 consolidated results.

Speaker #3: In the second quarter of 2026, Solstice recorded $1.148 billion in net sales, up 11% year over year, which exceeded the top end of the guidance we provided for the quarter.

Speaker #3: In our refrigerants and applied solutions segment, strong demand for refrigerants driven by the ongoing HFO transition and accelerating data center orders together with continued strength in nuclear and a recovery in healthcare packaging drove double-digit top-line growth for the segment.

David Sewell: In our Refrigerants and Applied Solutions segment, strong demand for refrigerants driven by the ongoing HFO transition and accelerating data center orders, together with continued strength in nuclear and a recovery in healthcare packaging, drove double-digit top-line growth for the segment. In our Electronic and Specialty Materials segment, net sales growth was driven by robust demand in our electronic materials business for semiconductor applications. Adjusted EBITDA for Q2 of 2026 was $290 million, up 2% year over year and exceeding the top end of the guidance we provided for the quarter. Adjusted EBITDA margin was 25.3%, in line with our expectations for the quarter. The decline in margin year over year was primarily driven by the timing of certain plant turnaround activity and prior year production incentive credits, partially offset by volume growth and favorable pricing.

Speaker #3: In our electronic and specialty materials segment, net sales growth was driven by robust demand in our electronic materials business for semiconductor applications. Adjusted EBITDA for the second quarter of 2026 was $290 million.

David Sewell: Adjusted EBITDA for Q2 of 2026 was $290 million, up 2% year over year and exceeding the top end of the guidance we provided for the quarter. Adjusted EBITDA margin was 25.3%, in line with our expectations for the quarter. The decline in margin year over year was primarily driven by the timing of certain plant turnaround activity and prior year production incentive credits, partially offset by volume growth and favorable pricing.

Speaker #3: Up 2% year over year, and exceeding the top end of the guidance we provided for the quarter. Adjusted EBITDA margin was $25.3%, in line with our expectations for the quarter.

Speaker #3: The decline in margin year over year was primarily driven by the timing of certain plant turnaround activity and prior-year production incentive credits, partially offset by volume growth and favorable pricing.

Speaker #3: As a reminder, we continue to see ongoing strong demand for our low global warming potential products. Now over a year into the 454B transition, we continue to expect our refrigerants and applied solutions segment to deliver mid-30% adjusted EBITDA margins in the second half of 2026 as the aftermarket develops.

David Sewell: As a reminder, we continue to see ongoing strong demand for our low global warming potential products. Now over a year into the R-454B transition, we continue to expect our Refrigerants and Applied Solutions segment to deliver mid-30% adjusted EBITDA margins in H2 2026 as the aftermarket develops. We reported GAAP net income attributable to Solstice of $119 million for Q2 2026, up from $97 million a year ago, or $0.75 per diluted share. Consistent with what we signaled last quarter, non-controlling interest declined sequentially to $15 million this quarter from the atypically high $20 million in Q1. This quarter, we also reported adjusted diluted EPS of $0.88 for Q2.

Speaker #3: We reported gap net income attributable to Solstice of $119 million for the second quarter of 2026, up from $97 million a year ago, or 75 cents per diluted share.

David Sewell: We reported GAAP net income attributable to Solstice of $119 million for Q2 2026, up from $97 million a year ago, or $0.75 per diluted share. Consistent with what we signaled last quarter, non-controlling interest declined sequentially to $15 million this quarter from the atypically high $20 million in Q1. This quarter, we also reported adjusted diluted EPS of $0.88 for Q2.

Speaker #3: Consistent with what we signaled last quarter, non-controlling interest declined sequentially to $15 million this quarter, from the atypically high $20 million in the first quarter.

Speaker #3: This quarter, we also reported adjusted diluted EPS of $88 cents for the second quarter, finally free cash flow for the first half of 2026 was $248 million.

David Sewell: Finally, free cash flow for H1 2026 was $248 million, which is inclusive of the significant year over year increase in growth CapEx as we invest in high return opportunities across the business, including the Spokane expansion to meet robust sputtering target demand. With that, I'll now turn it over to Tina Pierce, our CFO, to discuss our financial results for Q2 in more detail.

Speaker #3: Which is inclusive of the significant year-over-year increase in growth capex as we invest in high-return opportunities across the business. Including the Spokane expansion to meet robust sputtering target demand.

Speaker #3: And with that, I'll now turn it over to Tina Pierce, our CFO, to discuss our financial results for the second quarter in more detail.

Speaker #2: Thank you, David. Turning to slide 6, I'd like to discuss in more detail the key drivers of our year-over-year net sales and adjusted EBITDA performance in the second quarter.

Tina Pierce: Thank you, David. Turning to slide six, I'd like to discuss in more detail the key drivers of our year over year net sales and adjusted EBITDA performance in Q2. Beginning with our net sales of $1.148 billion from the quarter, organic net sales growth was approximately 11%, reflecting both volume growth and favorable pricing. This primarily reflects volume growth and favorable pricing in both nuclear and refrigerants, as well as volume growth in electronic materials. Foreign currency translation was a modest tailwind of roughly half a point. Turning to our adjusted EBITDA of $290 million for the quarter, up 2% versus the prior year period. Year over year improvement in ESM, together with a favorable corporate and standalone comparison, more than offset a decline in RAS, which is primarily attributable to the timing of certain plant turnaround activity and production incentive credits that David just discussed.

Speaker #2: Beginning with our net sales of $1.148 billion from the quarter, organic net sales growth was approximately 11%, reflecting both volume growth and favorable pricing.

Speaker #2: This primarily reflects volume growth and favorable pricing in both nuclear and refrigerants, as well as volume growth in electronic materials. Foreign currency translation was a modest tailwind of roughly half a point.

Speaker #2: Turning to our adjusted EBITDA of $290 million for the quarter of 2% versus the prior year period. Year-over-year improvement in ESM, together with a favorable corporate and standalone comparison, more than offset a decline in RAS, which is primarily attributable to the timing of certain plant turnaround activity and production incentive credits that David just discussed.

Tina Pierce: Turning to our adjusted EBITDA of $290 million for the quarter, up 2% versus the prior year period. Year over year improvement in ESM, together with a favorable corporate and standalone comparison, more than offset a decline in RAS, which is primarily attributable to the timing of certain plant turnaround activity and production incentive credits that David just discussed.

Speaker #2: Turning to slide 7, I'll now discuss the results in each of our two segments in more detail, beginning with refrigerants and applied solutions. Overall, the segment achieved $850 million in net sales for the second quarter of 2026, reflecting 12% growth year over year, driven by volume growth and favorable pricing across the business.

Tina Pierce: Turning to slide seven, I'll now discuss the results in each of our two segments in more detail, beginning with Refrigerants and Applied Solutions. Overall, the segment achieved $850 million in net sales for Q2 2026, reflecting 12% growth year over year, driven by volume growth and favorable pricing across the business. The segment posted $280 million in adjusted EBITDA for Q2 2026, down 6% year over year, an adjusted EBITDA margin of 32.9%, down 648 basis points year over year. As mentioned previously, this decrease was primarily driven by the timing of plant turnaround activity and prior year production incentive credits, which more than offset volume growth and favorable pricing in the segment. Turning to the performance of our sub-segments, refrigerant net sales increased 13% year over year to $473 million, driven by both favorable pricing and volume growth across our product offerings.

Speaker #2: The segment posted $280 million in adjusted EBITDA for the second quarter of 2026, down 6% year over year, and adjusted EBITDA margin of $32.9%, down 648 basis points year over year.

Speaker #2: As mentioned previously, this decrease was primarily driven by the timing of plant turnaround activity and prior year production incentive credits. Which more than offset volume growth and favorable pricing in the segment.

Tina Pierce: As mentioned previously, this decrease was primarily driven by the timing of plant turnaround activity and prior year production incentive credits, which more than offset volume growth and favorable pricing in the segment. Turning to the performance of our sub-segments, refrigerant net sales increased 13% year over year to $473 million, driven by both favorable pricing and volume growth across our product offerings.

Speaker #2: Turning to the performance of our sub-segments, refrigerant net sales increased 13% year over year to $473 million, driven by both favorable pricing and volume growth across our product offerings.

Speaker #2: Beyond the 454 strength that David highlighted, data center orders remain robust again this quarter, underscoring how this business sits at the intersection of several key secular growth trends.

Tina Pierce: Beyond the R-454B strength that David highlighted, data center orders remain robust again this quarter, underscoring how this business sits at the intersection of several key secular growth trends. Our nuclear business had $125 million in net sales, up 27% year over year, reflecting both favorable pricing and increased volumes. We are seeing positive momentum in this business, reinforced by new supply agreements with three small modular reactor developers. For the first time in decades, we are seeing meaningful innovation from entrepreneurs across the nuclear ecosystem. We remain excited about this differentiated business and the critical role we believe it will play in the nuclear renaissance now clearly taking shape. Building solutions and intermediate net sales were $180 million, down 1% year over year.

Speaker #2: Our nuclear business had $125 million in net sales, up 27% year over year, reflecting both favorable pricing and increased volumes. We are seeing positive momentum in this business, reinforced by new supply agreements with three small modular reactor developers.

Speaker #2: For the first time in decades, we are seeing meaningful innovation from entrepreneurs across the nuclear ecosystem. We remain excited about this differentiated business and the critical role we believe it will play in the nuclear renaissance now clearly taking shape.

Tina Pierce: For the first time in decades, we are seeing meaningful innovation from entrepreneurs across the nuclear ecosystem. We remain excited about this differentiated business and the critical role we believe it will play in the nuclear renaissance now clearly taking shape. Building solutions and intermediate net sales were $180 million, down 1% year over year.

Speaker #2: Building solutions and intermediate net sales were $180 million down 1% year over year, continued construction market softness weighed on the sub-segment, but we remain focused on advancing our LGWP solutions and maintaining disciplined operational execution to ensure we are well-positioned to our serve our customers upon a return to more normalized demand in key end markets.

Tina Pierce: Continued construction market softness weighed on the sub-segment, we remain focused on advancing our LGWP solutions and maintaining disciplined operational execution to ensure we are well positioned to serve our customers upon a return to more normalized demand in key end markets. Lastly, for healthcare packaging, net sales were $73 million, up 24% year over year. The increase was driven by recovery and customer demand patterns following the destocking we saw in the H2 2025, as well as favorable net pricing. Turning to our Electronic and Specialty Materials segment on Slide eight. The segment achieved $298 million in net sales for the Q2 2026, reflecting 8% growth year over year, driven by volume growth in electronic materials.

Speaker #2: Lastly, for healthcare packaging, net sales were $73 million, up 24% year over year. The increase was driven by a recovery and customer demand patterns following the destocking we saw in the second half of 2025, as well as favorable net pricing.

Tina Pierce: Lastly, for healthcare packaging, net sales were $73 million, up 24% year over year. The increase was driven by recovery and customer demand patterns following the destocking we saw in the H2 2025, as well as favorable net pricing. Turning to our Electronic and Specialty Materials segment on Slide eight. The segment achieved $298 million in net sales for the Q2 2026, reflecting 8% growth year over year, driven by volume growth in electronic materials.

Speaker #2: Now, turning to our Electronic and Specialty Materials segment on slide 8. The segment achieved $298 million in net sales for the second quarter of 2026, reflecting 8% growth year over year, driven by volume growth in electronic materials.

Speaker #2: The segment posted $64 million in adjusted EBITDA for the second quarter of 2026, up 24% year over year, and adjusted EBITDA margin of $21.6%, up 280 basis points year over year.

Tina Pierce: The segment posted $64 million in adjusted EBITDA for the Q2 2026, up 24% year over year, an adjusted EBITDA margin of 21.6%, up 280 basis points year over year. The increase was primarily driven by volume growth in electronic materials and productivity improvements. Looking at the performance of our sub-segments, electronic materials net sales increased 15% year over year to $119 million, driven by volume growth and robust customer demand across semiconductor applications. We were also recently recognized with the top supplier award from SK hynix, a strong external validation of the strength of our technology and execution. As David noted, we are expanding electronic materials capacity to meet AI and data center-driven semiconductor demand, which we see as a significant multiyear opportunity for Solstice. Safety and defense solutions had $43 million in net sales, up 7% year over year.

Speaker #2: The increase was primarily driven by volume growth in electronic materials and productivity improvements. Looking at the performance of our sub-segments, Electronic Materials net sales increased 15% year over year to $119 million, driven by volume growth and robust customer demand across semiconductor applications.

Speaker #2: We were also recently recognized with the top supplier award from SK Hynix, a strong external validation of the strength of our technology and execution.

Tina Pierce: We were also recently recognized with the top supplier award from SK hynix, a strong external validation of the strength of our technology and execution. As David noted, we are expanding electronic materials capacity to meet AI and data center-driven semiconductor demand, which we see as a significant multiyear opportunity for Solstice. Safety and defense solutions had $43 million in net sales, up 7% year over year.

Speaker #2: As David noted, we are expanding electronic materials capacity to meet AI and data center-driven semiconductor demand, which we see as a significant multi-year opportunity for Solstice.

Speaker #2: Safety and defense solutions had $43 million in net sales, up 7% year over year. As we anticipated last quarter, the business returned to growth driven by non-armor applications.

Tina Pierce: As we anticipated last quarter, the business returned to growth driven by non-armor applications, we continue to invest in capacity expansion to support long-term market demand for our Spectra line of solutions. Research and performance chemical net sales increased 3% year over year to $135 million, with growth in fine chemicals partially offset by ongoing end market softness in specialty additives. On Slide nine to discuss Solstice's balance sheet and capital management. Our strong balance sheet, cash flow generation, and conservative leverage position continue to enable financial flexibility and fuel Solstice's many attractive growth investments. I would like to start with cash, with Solstice generating $461 million of operating cash flow in the H1. In addition to healthy earnings generation, we were able to execute strong working capital management, reducing our dollar inventory despite the healthy increase in revenue and rising input cost.

Speaker #2: And we continue to invest in capacity expansion to support long-term market demand for our Spectra line of solutions. Finally, research and performance chemical net sales increased 3% year over year to $135 million, with growth in biochemicals partially offset by ongoing end market softness and specialty additives.

Speaker #2: Moving to slide 9 to discuss Solstice's balance sheet and capital management. Our strong balance sheet cash flow generation and conservative leverage position continue to enable financial flexibility and fuel Solstice's many attractive growth investments.

Tina Pierce: On Slide nine to discuss Solstice's balance sheet and capital management. Our strong balance sheet, cash flow generation, and conservative leverage position continue to enable financial flexibility and fuel Solstice's many attractive growth investments. I would like to start with cash, with Solstice generating $461 million of operating cash flow in the H1. In addition to healthy earnings generation, we were able to execute strong working capital management, reducing our dollar inventory despite the healthy increase in revenue and rising input cost.

Speaker #2: I would like to start with cash, with Solstice generating $461 million of operating cash flow in the first half of the year. In addition to healthy earnings generation, we were able to execute strong working capital management, reducing our dollar inventory despite the healthy increase in revenue and rising input cost.

Speaker #2: Our capital expenditures for the first half were $186 million, a 32% increase compared to the prior year period due to planned increases in capital spending to drive long-term growth and high return areas of the business.

Tina Pierce: Our capital expenditures for H1 were $186 million, a 32% increase compared to the prior year period due to planned increases in capital spending to drive long-term growth in high return areas of the business. As a reminder, beyond the electronic materials expansion in Spokane, we are actively investing in our Spectra ballistic fibers expansion in Virginia, as well as advancing further expansion of our nuclear conversion business. As we work through debottlenecking at our Metropolis facility, we are exploring attractive incremental opportunities that we believe can take capacity beyond 10,000 metric tons, and we expect to share more later this year. Turning to our capital structure, we have maintained a conservative leverage profile and strong liquidity position.

Speaker #2: As a reminder, beyond the electronic materials expansion in Spokane, we are actively investing in our Spectra Ballistic Fibers expansion in Virginia, as well as advancing further expansion of our nuclear conversion business.

Speaker #2: As we work through debottlenecking at our metropolis facility, we are exploring attractive incremental opportunities that we believe can take capacity beyond 10,000 metric tons and we expect to share more later this year.

Tina Pierce: As we work through debottlenecking at our Metropolis facility, we are exploring attractive incremental opportunities that we believe can take capacity beyond 10,000 metric tons, and we expect to share more later this year. Turning to our capital structure, we have maintained a conservative leverage profile and strong liquidity position.

Speaker #2: Turning to our capital structure, we have maintained a conservative leverage profile and strong liquidity position. As of June 30, 2026, our total debt was approximately $2 billion, and we had cash and cash equivalents of $750 million.

Tina Pierce: As of 30 June 2026, our total debt was approximately $2 billion, and we had cash and cash equivalents of $750 million, resulting in net debt of approximately $1.25 billion and a net leverage ratio of approximately 1.3 times based on a trailing 12-month adjusted EBITDA. As of 30 June 2026, we also had $1 billion of availability under our revolving credit facility. Combined with the cash on our balance sheet, this results in approximately $1.75 billion of total liquidity. As David mentioned earlier, we announced on 17 July approval of a quarterly dividend of $0.075 per share, in line with last quarter, which will be payable on 10 September to share owners of record as of 27 August. We continue to view returning excess capital to shareholders as a key piece of our overall capital allocation approach.

Speaker #2: Resulting in net debt of approximately $1.25 billion. And a net leverage ratio of approximately 1.3 times based on a trailing 12-month adjusted EBITDA. As of June 30, 2026, we also had $1 billion of availability under our revolving credit facility.

Speaker #2: Combined with the cash on our balance sheet, this results in approximately $1.75 billion of total liquidity. As David mentioned earlier, we announced on July 17 approval of a quarterly dividend of $7.50 per share.

Tina Pierce: As David mentioned earlier, we announced on 17 July approval of a quarterly dividend of $0.075 per share, in line with last quarter, which will be payable on 10 September to share owners of record as of 27 August. We continue to view returning excess capital to shareholders as a key piece of our overall capital allocation approach.

Speaker #2: In line with last quarter, which will be payable on September 10 to share owners of record of as of August 27. We continue to view returning excess capital to shareholders as a key piece of our overall capital allocation approach.

Speaker #2: This same balance sheet strength is what allows us to finance the element solutions transaction from a position of discipline, we have structured the acquisition to preserve our current credit rating profile and our cash generation supports a clear path back to our target leverage in the periods following close.

Tina Pierce: This same balance sheet strength is what allows us to finance the Element Solutions transaction from a position of discipline. We have structured the acquisition to preserve our current credit rating profile, and our cash generation supports a clear path back to our target leverage in the periods following close. Turning to slide 10, I'd like to discuss our outlook and financial guidance for both the full year and Q3 2026. Importantly, we did what we said we would do during this quarter, delivering above the range we set and converting that into strong cash generation. This kind of execution is the foundation for the confidence we are expressing today, both in raising our full year outlook and in our continued ability to drive growth.

Speaker #2: Turning to slide 10, I'd like to discuss our outlook and financial guidance for both the full year and the third quarter of 2026. Importantly, we did what we said we would do during this quarter, delivering above the range we said and converting that into strong cash generation.

Tina Pierce: Turning to slide 10, I'd like to discuss our outlook and financial guidance for both the full year and Q3 2026. Importantly, we did what we said we would do during this quarter, delivering above the range we set and converting that into strong cash generation. This kind of execution is the foundation for the confidence we are expressing today, both in raising our full year outlook and in our continued ability to drive growth.

Speaker #2: This kind of execution is the foundation for the confidence we are expressing today, both in raising our full year outlook and in our continued ability to drive growth.

Speaker #2: For the full year 2026, we now expect to deliver net sales between $4.125 billion and $4.185 billion. Adjusted EBITDA between $1.035 billion and $1.055 billion.

Tina Pierce: For the full year 2026, we now expect to deliver net sales between $4.125 billion and $4.185 billion, adjusted EBITDA between $1.035 billion and $1.055 billion, and adjusted diluted earnings per share between $2.75 and $2.95. Additionally, we now expect capital expenditures between $420 million and $440 million. Today, we are also providing guidance for Q3 2026 as we want to help investors better understand our business and our first year as a public company. In Q3, we expect to deliver net sales between $990 million and $1.030 billion. Our outlook for Q3 assumes continued momentum in refrigerants and electronic materials and more modest nuclear performance, reflecting the timing of final product loan returns and order patterns with consistent margin performance. A few additional modeling points for H2.

Speaker #2: And adjusted diluted earnings per share between $2.75 and $2.95. Additionally, we now expect capital expenditures between $420 million and $440 million. Today, we are also providing guidance for the third quarter of 2026 as we want to help investors better understand our business and our first year as a public company.

Tina Pierce: Today, we are also providing guidance for Q3 2026 as we want to help investors better understand our business and our first year as a public company. In Q3, we expect to deliver net sales between $990 million and $1.030 billion. Our outlook for Q3 assumes continued momentum in refrigerants and electronic materials and more modest nuclear performance, reflecting the timing of final product loan returns and order patterns with consistent margin performance. A few additional modeling points for H2.

Speaker #2: In the third quarter, we expect to deliver net sales between $990 million and $1.3 billion. Our outlook for the third quarter assumes continued momentum in refrigerants and electronic materials, and more modest nuclear performance reflecting the timing of final product loan returns and order patterns with consistent margin performance.

Speaker #2: A few additional modeling points for the second half. We expect a negative revenue of approximately $30 million from the final return of nuclear product loans skewed modestly toward the fourth quarter.

Tina Pierce: We expect a negative revenue of approximately -$30 million from the final return of nuclear product loans, skewed modestly toward Q4. I'd now like to pass it back over to David for some closing remarks.

Speaker #2: I'd now like to pass it back over to David for some closing remarks.

Speaker #1: Thank you, Tina. And please turn to slide 11. With strong performance in the first half and solid momentum heading into the remainder of the year, we are well positioned to deliver on our full year 2026 guidance.

David Sewell: Thank you, Tina, please turn to slide 11. With strong performance in H1 and solid momentum heading into the remainder of the year, we are well positioned to deliver on our full year 2026 guidance. As we discussed today, we are seeing continued strong demand in our businesses that serve key end markets aligned with secular growth trends, including artificial intelligence, data centers, semiconductor manufacturing, and nuclear energy and thermal management. These are core strategic areas for Solstice, where we have both a clear right to play and right to win. Solstice is a strong, growing business today with durable pricing power, high returns on capital, and robust free cash flow.

Speaker #1: As we discussed today, we are seeing continued strong demand in our businesses that serve key end markets aligned with secular growth trends including artificial intelligence, data centers, semiconductor manufacturing, and nuclear energy and thermal management.

Speaker #1: These are core strategic areas for Solstice. We have both a clear right to play and right to win. Solstice is a strong growing business today with durable pricing power high returns on capital and robust free cash flow.

David Sewell: These are core strategic areas for Solstice, where we have both a clear right to play and right to win. Solstice is a strong, growing business today with durable pricing power, high returns on capital, and robust free cash flow.

Speaker #1: We are putting that cash flow to work with discipline reinvesting in our businesses. Both in terms of expanding our R&D pipeline as well as high return growth capex.

David Sewell: We are putting that cash flow to work with discipline, reinvesting in our businesses, both in terms of expanding our R&D pipeline as well as high return growth CapEx, while returning excess capital to shareholders through our quarterly dividend. Our pending acquisition of Element Solutions builds on that momentum, accelerating a strategy that is already working. We are energized by both delivering on our current business quarter after quarter and bringing these two companies together to create even more value. We have work well underway to develop an integration roadmap to seamlessly bring our businesses together after this transaction closes in order to unlock the compelling opportunities we see ahead for our combined company. We remain excited about the significant opportunities ahead in 2026 and beyond. We look forward to sharing additional updates throughout the year. With that, we are now happy to take your questions.

Speaker #1: While returning excess capital to shareholders through our quarterly dividend. Our pending acquisition of element solutions builds on that momentum, accelerating a strategy that has already working.

Speaker #1: We are energized by both delivering on our current business quarter after quarter and bringing these two companies together to create even more value. We have already begun developing an integration roadmap to seamlessly bring our businesses together after this transaction closes, in order to unlock the compelling opportunities we see ahead for our combined company.

David Sewell: We have work well underway to develop an integration roadmap to seamlessly bring our businesses together after this transaction closes in order to unlock the compelling opportunities we see ahead for our combined company. We remain excited about the significant opportunities ahead in 2026 and beyond. We look forward to sharing additional updates throughout the year. With that, we are now happy to take your questions.

Speaker #1: We remain excited about the significant opportunities ahead in 2026 and beyond. We look forward to sharing additional updates throughout the year. And with that, we are now happy to take your questions.

Speaker #3: Thank you. We'll now be conducting a question-and-answer session. If you'd like to be placed into the question queue, please press star one on your telephone keypad.

Operator: Thank you. We'll now be conducting a question and answer session. If you'd like to be placed into question queue, please press *1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press *2 if you'd like to remove a question from the queue. As a reminder, please ask one question and one follow-up, then return to the queue. One moment, please, while we poll for questions. Our first question today is coming from Kevin McCarthy from Vertical Research Partners. Your line is now live.

Speaker #3: A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue.

Speaker #3: As a reminder, please ask one question in one follow-up then return to the queue. One moment, please, while we pull for questions. Our first question today is coming from Kevin McCarthy from Vertical Research Partners.

Speaker #3: Your line is now live.

Speaker #4: Hi, this is Matt Hauer on for Kevin McCarthy. Congrats on the nice quarter and in refrigerants, how do you see sales and EBITDA growth unfolding in the back half of the year?

Matt Hettwer: Hi, this is Matt Hettwer on for Kevin McCarthy. Congrats on the nice quarter. In refrigerants, how do you see sales and EBITDA growth unfolding in the back half of the year? What kind of margin impact do you expect from incremental unit sales given the transition to HFOs?

Matthew Hettwer: Hi, this is Matt Hettwer on for Kevin McCarthy. Congrats on the nice quarter. In refrigerants, how do you see sales and EBITDA growth unfolding in the back half of the year? What kind of margin impact do you expect from incremental unit sales given the transition to HFOs?

Speaker #4: And what kind of margin impact do you expect from incremental unit sales given the transition to HFOs?

Speaker #5: Thanks, Matt. What we talked about for our refrigerants business is continued sequential margin expansion. I think we talked about mid-30s for the second half of the year, which we feel very confident in.

David Sewell: Thanks, Matt. What we talked about for our refrigerants business is continued sequential margin expansion. I think we talked about mid-30s for the second half of the year, which we feel very confident in. We talked about some of the margin impacts in Q2. With that behind us, we see the margin expansion continuing. We did have sequential margin expansion in refrigerants in Q2 over Q1. From a volume standpoint, we feel very confident in continued strong demand for our refrigerants. We're actually seeing a little bit of an acceleration to HFOs from HFCs, which we think is a continued positive. For the most part, the aftermarket for HFOs in North America has not kicked in yet. That's additional upside that we see moving forward.

Speaker #5: We talked about some of the margin impacts in second quarter with that behind us. We see the margin expansion continuing. We did have sequential margin expansion in refrigerants in Q2 over Q1.

Speaker #5: And from a volume standpoint, we feel very confident in continued strong demand for our refrigerants. We're actually seeing a little bit of an acceleration to HFOs from HFCs which we think is a continued positive.

David Sewell: From a volume standpoint, we feel very confident in continued strong demand for our refrigerants. We're actually seeing a little bit of an acceleration to HFOs from HFCs, which we think is a continued positive. For the most part, the aftermarket for HFOs in North America has not kicked in yet. That's additional upside that we see moving forward.

Speaker #5: And for the most part, the aftermarket for HFOs in North America has not kicked in yet. So that's additional upside that we see moving forward.

Speaker #4: Thanks. And then as a follow-up, maybe you could discuss how you're development of next generation non-PFAS refrigerant molecules is progressing?

Matt Hettwer: Thanks. As a follow-up, maybe you could discuss how your development of next generation non-PFAS refrigerant molecules is progressing.

Matthew Hettwer: Thanks. As a follow-up, maybe you could discuss how your development of next generation non-PFAS refrigerant molecules is progressing.

Speaker #5: So we're doing a lot of work on next generation YF molecule and we're really excited about the development that we have. We're currently in testing that looks very promising and we have already begun conversations with customers on this as well.

David Sewell: We're doing a lot of work on next generation HFO-1234yf molecule, and we're really excited about the development that we have. We're currently in testing that looks very promising, and we have already begun conversations with customers on this as well. Part of the refrigerants that Tina talked about on the margins, we did increase our R&D spend earlier this year. A big chunk of that is going to the next generation HFO-1234yf molecule, as well as next generation molecules in development for things like two-phase direct-to-chip immersion cooling. We feel really well-positioned to continue to innovate in next generation.

Speaker #5: Part of the refrigerants that Tina talked about on the margins we did increase our R&D spend earlier this year. And a big chunk of that is going to the next generation YF molecule, as well as next generation molecules in development for things like two-phase directed chip immersion cooling.

David Sewell: A big chunk of that is going to the next generation HFO-1234yf molecule, as well as next generation molecules in development for things like two-phase direct-to-chip immersion cooling. We feel really well-positioned to continue to innovate in next generation.

Speaker #5: So we feel really well positioned to continue to innovate in next generation.

Speaker #3: Thank you. Our next question today is coming from Josh Spector from UBS. Your line is now live.

Operator: Thank you. Our next question today is coming from Josh Spector from UBS. Your line is now live.

Speaker #4: Yeah, hi, good morning. I just wanted to ask about the second half guidance. So you gave sales but not EBITDA for three Q. So I'm not sure why you didn't give that just considering we don't have a ton of history.

Josh Spector: Yeah. Hi, good morning. I just wanted to ask about the H2 guidance. You gave sales, but not EBITDA for 3Q. I'm not sure why you didn't give that, just considering we don't have a ton of history. Can you help us either with a specific kind of range for 3Q EBITDA or a way to think about phasing, just given the moving parts here?

Speaker #4: So can you help us either with a specific kind of range for three Q EBITDA or a way to think about phasing just given the moving parts here?

Speaker #6: Yeah, hi Josh. Yeah, the reason is that our margins have been very consistent throughout 2026. We've got now one quarter and second quarter as well as the full year guidance.

Tina Pierce: Yeah. Hi, Josh. Yeah, the reason is that our margins have been very consistent throughout 2026. We've got now one quarter, and Q2, as well as the full year guidance. I would just say that the way we looked at it is our margin rate has been right around that 25% range.

Speaker #6: But I would just say that the way we looked at it is our margin rate has been right around that 25%. Range.

Speaker #5: So Josh, you could probably just back into it with low 25% margin range with that revenue.

David Sewell: Josh, you could probably just back into it with low 25% margin range with that revenue.

Speaker #6: With the revenue range that we guided.

Tina Pierce: With the revenue range that we guided.

Speaker #5: Yeah.

David Sewell: Yeah.

Speaker #4: And you expect that consistent three Q and four Q then?

Josh Spector: You expect that consistent Q3 and Q4 then?

Speaker #5: We do. We are as we've talked about, we do expect to see sequential growth in our margins. As we move forward, but we're as we come off the TSAs and some of the other aspects, we don't anticipate that changing.

David Sewell: We do. As we've talked about, we do expect to see sequential growth in our margins as we move forward. As we come off the TSAs, and some of the other aspects, we don't anticipate that changing, but I would anticipate small sequential growth in our margin expansion.

Speaker #5: But I would anticipate small sequential growth in our margin expansion.

Speaker #4: Okay, thanks. And if I could just ask a follow-up on refrigerants, I mean, you noted data center growth. I'm just curious, are you at a point now where you could talk about the exposure there in terms of how much of refrigerant sales are exposed to data centers, what the growth is, and is that outside the data center cooling or is this liquid cooling inside that's driving some of the upside there?

Josh Spector: Okay, thanks. If I could just ask a follow-up on refrigerants. You noted data center growth. I'm just curious, are you at a point now where you could talk about the exposure there in terms of how much of refrigerant sales are exposed to data centers, what the growth is, and is that outside the data center cooling, or is this liquid cooling inside that's driving some of the upside there?

Speaker #5: So our data center cooling, it's still a smaller piece of our overall refrigerants. Which is why we just haven't broken it out. However, saying that, it's the fastest growing aspect of our refrigerants business.

David Sewell: Our data center cooling, it's still a smaller piece of our overall refrigerants, which is why we just haven't broken it out. However, saying that, it's the fastest growing aspect of our refrigerants business. It's growing strong double digits. Most of that is still in standard cooling that we do in data centers, chillers. The work we're doing in things like two-phase and immersion cooling is really to be coming in the future. The expansive growth of data centers and the technology we have in our refrigerants for data centers is really compelling, and that's why we're seeing such tremendous growth.

Speaker #5: It's growing strong double digits. Most of that is still in standard cooling that we do in data centers, chillers, the work we're doing in things like two-phase and immersion cooling.

Speaker #5: Is really to be coming in the future. But the expansive growth of data centers and the technology we have in our refrigerants and for data centers is really compelling.

Speaker #5: And that's why we're seeing such tremendous growth.

Speaker #3: Thank you. Our next question is coming from John McNulty from BMO Capital Markets. Your line is now live.

Operator: Thank you. Our next question is coming from John McNulty from BMO Capital Markets. Your line is now live.

Speaker #2: Yeah, good morning. Thanks for taking my question, and congrats on some solid results. I wanted to dig into the RAS margins. Admittedly, they came in a little lighter than we expected in Q2.

John McNulty: Good morning. Thanks for taking my question, and congrats on some solid results. I wanted to dig into the RAS margins. Admittedly, they came in a little lighter than we expected in Q2, yet you're looking for mid-30s in the H2, and that, I think, comes despite that uranium loan giveback. I guess can you help unpack the Q2 maybe coming in a little bit on the lighter side, and how you get to those mid-30 margins even with that loan giveback, which I would think is at least a little bit of a drag.

Speaker #2: And yet, you're looking for mid-30s in the back half. And that, I think, comes despite that uranium loan giveback. So I guess, can you help unpack the Q2 maybe coming in a little bit on the lighter side, and how you get to those mid-30 margins even with that loan giveback, which I would think is at least a little bit of a drag?

Speaker #6: Yeah. So John, yeah, first off, we did have as we had signaled in quarter one, we did have very heavy plant turnarounds in the quarter.

Tina Pierce: John, first off, as we had signaled in Q1, we did have very heavy plant turnarounds in the quarter. Good news is all sites are back up and operating well. We did have one campaign that did shift from Q2 to the H2, and there is an absorption benefit from that shift. We also had some production incentive credit timing, as David alluded. Last year in Q2, we secured some of these incentives, and it was a cumulative impact in Q2 of last year, which made for some difficult comps for this year. Going forward, that will be more linear as we recognize each of it each quarter. I would say that Q2 was our most significant outage quarter. We tend not to do that much during the summer months when it's extremely warm.

Speaker #6: Good news is all sites are back up and operating well. We did have one campaign that did shift from second quarter to the second half.

Speaker #6: And there is an absorption benefit from that shift. And then we also had some production incentive credit timing as David alluded. So last year in second quarter, we secured some of these incentives.

Tina Pierce: Last year in Q2, we secured some of these incentives, and it was a cumulative impact in Q2 of last year, which made for some difficult comps for this year. Going forward, that will be more linear as we recognize each of it each quarter. I would say that Q2 was our most significant outage quarter. We tend not to do that much during the summer months when it's extremely warm.

Speaker #6: And it was a cumulative impact in second quarter of last year, which made for some difficult comps for this year. Going forward, that will be more linear.

Speaker #6: As we recognize each of it, each quarter. I would say that second quarter was our most significant outage quarter. We tend not to do that much during the summer months when it's extremely warm.

Speaker #6: We'll have some more minor planned outages. In the fall of the year, but not to the same scale as what we had in second quarter.

Tina Pierce: We'll have some more minor planned outages in the fall of the year, but not to the same scale as what we had in Q2. As David mentioned.

Speaker #6: And then as David mentioned, we do anticipate being mid-30s for the second half of this year.

Tina Pierce: Okay, fair

Tina Pierce: We do anticipate being mid-30s for the H2 of this year.

Speaker #2: Okay. Fair enough. And then I guess maybe just as a follow-up on the nuclear platform, I know the EPC work you're not expecting to kind of have any major announcements.

John McNulty: Okay. Fair enough. I guess maybe just as a follow-up on the nuclear platform, I know the EPC work, you're not expecting to have any major announcements until kind of the late fall, early winter. But I guess, can you help us to understand if you're maybe leaning toward either brownfield versus greenfield? Any potential updates around either support from the federal government and/or support that you may be seeing from your customers?

Speaker #2: Until kind of the late fall, early winter. But I guess can you help us to understand if you're maybe leaning toward either brownfield versus greenfield?

Speaker #2: And also any potential updates around either support from the federal government and/or support that you may be seeing from your customers?

Speaker #5: Yeah, John, good question. And you hit on the key three areas which the team is working extremely hard on. So if you take the first question on the engineering work, that's progressing extremely well.

David Sewell: John, good question. You hit on the key three areas which the team is working extremely hard on. If you take the first question on the engineering work, that's progressing extremely well. Whether it's a brownfield or greenfield, I would also add, and I think Tina alluded to it briefly in her comments, because of the debottlenecking work we're doing this year to get to that 10,000 plus tons, we're really encouraged that there may be the potential to do additional debottlenecking in Metropolis. I think you'll see more information coming out on additional debottlenecking. Then on a brownfield versus greenfield, we're right in the heat of all the analysis and where that's going to come out. One of the things we're also looking at is kind of a modular design, bringing in capacity at certain stages.

Speaker #5: And whether it's a brownfield or greenfield, I would also add, and I think Tina alluded to it briefly in her comments, because of the debottlenecking work we're doing this year, to get to that 10,000 plus tons.

Speaker #5: We're really encouraged at there may be the potential to do additional debottlenecking. In metropolis. So I think you'll see more information coming out on additional debottlenecking and then on a brownfield versus greenfield, we're right in the heat of all of the analysis.

David Sewell: I think you'll see more information coming out on additional debottlenecking. Then on a brownfield versus greenfield, we're right in the heat of all the analysis and where that's going to come out. One of the things we're also looking at is kind of a modular design, bringing in capacity at certain stages.

Speaker #5: And where that's going to come out, one of the things we're also looking at is kind of a modular design, bringing in capacity at certain stages.

Speaker #5: So I think we'll have more for you in the next few months. Exactly where that's coming in. But I would tell you, there's just an enormous amount of work going on.

David Sewell: I think we'll have more for you in the next few months, exactly where that's coming in. I would tell you, there's just an enormous amount of work going on, directionally, I think we'll be able to give you a lot more information when the study's completed over the next few months. We're very encouraged by everything we've seen. On parts two and three of your question, our customer discussions to secure longer-term contracts well into the mid-2030s is going very well. We're really encouraged by the reception we've had from customers because they fully understand the need for us to secure that volume to commit to the build. They want us to do this. They love our experience with 60-year history of working with them, the confidence that we can start up a new facility quickly. That's going extremely well.

Speaker #5: And directionally, I think we'll be able to give you a lot more information when those studies completed over the next few months. But we're very encouraged by everything we've seen.

Speaker #5: On parts two or three of your question, are customer discussions to secure longer-term contracts well into the mid-2030s is going very well. We're really encouraged by the reception we've had from customers because they fully understand the need for us to secure that volume to commit to the build.

David Sewell: We're really encouraged by the reception we've had from customers because they fully understand the need for us to secure that volume to commit to the build. They want us to do this. They love our experience with 60-year history of working with them, the confidence that we can start up a new facility quickly. That's going extremely well.

Speaker #5: And they want us to do this. They love our experience with 60-year history of working with them. The confidence that we can start up a new facility quickly.

Speaker #5: So that's going extremely well. And then the last piece on the government discussions, really encouraged by the feedback we're getting from the Department of Energy and NRC and across the government because you know the passion the current administration has to increase nuclear capacity.

David Sewell: Then the last piece on the government discussions, really encouraged by the feedback we're getting from the Department of Energy and NRC and across the government, because you know the passion the current administration has to increase nuclear capacity. They are certainly wanting to continue the partnership that we have with them as we move forward with the potential expansion. When we look at all three of the levers, we feel great about all of them as we move forward, I think we'll be able to share more over the next few months.

Speaker #5: And they are certainly wanting to continue the partnership that we have with them. As we move forward with the potential expansion. So when we look at all three of the levers, we feel great about all of them as we move forward.

Speaker #5: And I think we'll be able to share more over the next few months.

Speaker #3: Thank you. Our next question is coming from John Roberts from Mizuho Securities. Your line is now live.

Operator: Thank you. Our next question is coming from John Roberts from Mizuho Securities. Your line is now live.

John Roberts: Thank you. It looks like the revenue guide for Q3 and Q4 are roughly the same. The nuclear payback is skewed to the Q4. I think refrigerants is normally seasonally lower. Why would the revenue be similar between the two quarters?

Speaker #2: Thank you. It looks like the revenue guide for the September quarter and the December quarter are roughly the same. But the nuclear payback is skewed to the fourth quarter and I think refrigerance is normally seasonally lower.

Speaker #2: So why would the revenue be similar between the two quarters?

Speaker #6: Well, yeah, in terms of how we're looking at the second half of the year, as you mentioned, quarter two does tend to be the largest quarter for refrigerants.

Tina Pierce: Well, yeah. In terms of how we're looking at the H2, as you mentioned, Q2 does tend to be the largest quarter for refrigerants. Nuclear, there was a little bit of timing of the orders, a little bit lighter in the H2 due to the loan repayments that we mentioned. Electronics, though, we're seeing continued growth there. Also we're starting to see some of the capacity unlock in the H2. Then as we mentioned in last quarter's call, our safety and defense business, we were flat in Q1, and we anticipated that that would pick up through the remainder of the year. Other thing is there's really no assumed significant improvement in our construction businesses as well.

Speaker #6: Nuclear, there was a little bit of timing of the orders, a little bit lighter in the second half due to the loan repayments. It that we mentioned.

Speaker #6: Electronics, though, we're seeing continued growth there. And also, we're starting to see some of the capacity unlock in the second half of the year.

Tina Pierce: Electronics, though, we're seeing continued growth there. Also we're starting to see some of the capacity unlock in the H2. Then as we mentioned in last quarter's call, our safety and defense business, we were flat in Q1, and we anticipated that that would pick up through the remainder of the year. Other thing is there's really no assumed significant improvement in our construction businesses as well.

Speaker #6: And then as we mentioned in last quarter's call, our safety and defense business, we were flat in quarter one. And we anticipated that that would pick up through the remainder of the year.

Speaker #6: So those are really. Thing is there's really no assumed significant improvement in our construction businesses as well.

Speaker #2: Okay. And then since you were talking about maintenance downtime, in the first half, I assume metropolis was not part of the maintenance downtime, but maybe I'm wrong there.

John Roberts: Okay. Then since we're talking about maintenance downtime in the H1, I assume Metropolis was not part of the maintenance downtime, but maybe I'm wrong there. When is the next Metropolis planned maintenance downtime? Do you build inventory in advance of that? I don't think we've experienced one of those cycles yet. How do you handle that?

Speaker #2: When is the next Metropolis planned maintenance downtime? And do you build inventory in advance of that? I don't think we've experienced one of those cycles yet.

Speaker #2: So how do you handle that?

Speaker #6: Yeah, actually, metropolis was part of the turnarounds in quarter two and so that's a really an annualized process. We don't anticipate any more for this year.

Tina Pierce: Yeah, actually Metropolis was part of the turnarounds in Q2. That's really an annualized process. We don't anticipate any more for this year. Yes, we do try to build some inventory in anticipation of that turnaround.

Speaker #6: And yes, we do try to build some inventory in anticipation of that turnaround.

Speaker #3: Thanks. Thank you. Our next question today is coming from Hassan Ahmed from Olympic Global. Your line is now live.

Operator: Thank you. Our next question today is coming from Hassan Ahmed from Alembic Global. Your line is now live.

Speaker #7: Morning, David and Tina. Just wanted to sort of revisit the full year guidance again. I mean, from the sounds of it, you guys are obviously expecting a sequential decline in revenues Q2 to Q3.

Hassan Ahmed: Morning, David and Tina. Just wanted to sort of revisit the full year guidance again. From the sounds of it, you guys are obviously expecting a sequential decline in revenues Q2 to Q3. Obviously then you have the nuclear repayment in Q4. It just seems that the EBITDA seems to be quite skewed for Q4, despite the nuclear element there and the like. Just trying to understand what gives you that confidence. I understand that the turnarounds are behind you guys and the like, why are you expecting a Q4 to be, I guess materially larger than Q3?

Speaker #7: And obviously, then you have the nuclear repayment in Q4. It just seems that the EBITDA seems to be quite skewed for Q4, despite the nuclear element there and the like.

Speaker #7: So, just trying to understand what gives you that confidence. I understand that the turnarounds are behind you guys and the like, but why are you expecting Q4 to be, I guess, materially larger than Q3?

Speaker #6: Yeah. Yeah, hi, Hassan. As I mentioned, it's really the growth in our electronics business and some of the capacity unlock in addition to just the volumes that we're seeing in that business.

Tina Pierce: Yeah. Hi, Hassan. As I mentioned, it's really the growth in our electronics business and some of the capacity unlocked, in addition to just the volumes that we're seeing in that business. Safety and Defense, very light for Q1. We knew that it was going to be stronger for the remainder of the year. We do continue to expect good things from our refrigerants business. We now have lapped a full 12 months in terms of the 454B transition, we're continuing to see growth. David talked about the data centers. A lot of positive growth trends in that business as well.

Speaker #6: Safety and defense, very light for quarter one. We knew that it was going to be stronger for the remainder of the year. And we do continue to expect good things from our refrigerants business.

Speaker #6: We now have lapped a full 12 months in terms of the 454B transition, but we're continuing to see growth. David talked about the data centers.

Speaker #6: So a lot of positive growth trends in that business as well.

David Sewell: I would also add, we feel pretty good about some of the share gains that the team has executed on, I think we'll start to see continued volume momentum in that area.

Speaker #5: I would also add, we feel pretty good about some of the share gains that the team has executed on. And I think we'll start to see continued volume momentum in that area.

Speaker #7: Very helpful. And as a follow-up, I mean, obviously, a lot of macro uncertainty and volatility. How are you guys now thinking about sort of marketing for the permanent debt for the element solutions acquisition?

Hassan Ahmed: Very helpful. As a follow-up, obviously a lot of macro uncertainty and volatility. How are you guys now thinking about sort of marketing for the permanent debt for the Element Solutions acquisition? Any sort of considerations around the timeline?

Speaker #7: Any sort of considerations around the timeline?

Speaker #6: Yeah, well, we have a few windows. One would be in September and then kind of that October, November timeframe. And then, of course, first half.

Tina Pierce: Yeah. Well, we have a few windows. One would be in September, kind of that October, November timeframe, of course H1. We're going to be very opportunistic when we go to market.

Speaker #6: So we're going to be very opportunistic when we go to market.

Speaker #3: Thank you. Our next question is coming from Arun Deshpande from RBC Capital Markets. Your line is now live.

Operator: Thank you. Our next question is coming from Arun Viswanathan from RBC Capital Markets. Your line is now live.

Speaker #2: Great. Thanks for taking my questions. I hope you're doing well. I guess my first question is just on electronics. You did see strong 15% growth there.

Arun Viswanathan: Great. Thanks for taking my questions. I hope you're doing well. I guess my first question is just on electronics. You did see strong 15% growth there. Could you just elaborate a little bit on that? I guess as a related point, I know you have the expansion going on at Spokane, I guess maybe if you could provide some more details there, where are you on that? I think you'd previously mentioned that much of that was kind of spoken for. Is there an opportunity to continue to expand that facility, or what can you offer on that side? Thanks.

Speaker #2: Could you just elaborate a little bit on that? And I guess as a related point, I know you have the expansion going on at Spokane.

Speaker #2: So I guess maybe if you could provide some more details there, where are you on that? And I think you had previously mentioned that much of that was kind of spoken for.

Speaker #2: So is there an opportunity to continue to expand that facility or what can you offer on that side? Thanks.

Speaker #5: Yeah, thanks, Arun. Appreciate the question. So, if you look at our electronics business, it's really not only our sputtering targets; it's also our TIMs and heat spreaders.

David Sewell: Thanks, Arun. Appreciate the question. If you look at our electronics business, it's really not only our sputtering targets, it's also our TIMs and heat spreaders. It's really strong across the board. To the point on our Spokane expansion, the reason for some of that elevated CapEx that we alluded to is because we're pulling in some of that to accelerate the expansion of Spokane because the demand is just so strong. We believe increasing our output in H2, which also goes why we're more bullish on H2 of the year with our new guidance levels. We feel great about that, and just the demand we're seeing in addition to accelerating the CapEx, we're already having initial discussions on are we going to need to do another expansion even beyond this.

Speaker #5: It's really strong across the board. To the point on our Spokane expansion, the reason for some of that elevated capex that we alluded to is because we're pulling in some of that to accelerate the expansion of Spokane, because the demand is just so strong.

Speaker #5: So we will be we believe increasing our output in the second half, which also goes why we're more bullish on the second half of the year with our new guidance levels.

David Sewell: We believe increasing our output in H2, which also goes why we're more bullish on H2 of the year with our new guidance levels. We feel great about that, and just the demand we're seeing in addition to accelerating the CapEx, we're already having initial discussions on are we going to need to do another expansion even beyond this.

Speaker #5: So we feel great about that, and just the demand we're seeing. In addition to accelerating the capex, we're already having initial discussions on whether we are going to need to do another expansion even beyond this.

Speaker #5: So the demand is just that strong for our copper manganese sputtering targets, which is really become the go-to product for leading-edge nodes. And so we are accelerating our customers are increasing their forecasts multiple times over the last several months.

David Sewell: The demand is just that strong for our copper manganese sputtering targets, which has really become the go-to product for leading edge nodes. We are accelerating. Our customers are increasing their forecasts multiple times over the last several months. These forecasts go out multiple years. We feel really good about the investments we're making in Spokane, and we'll continue to accelerate and expand capacity as quickly and safely as we possibly can.

Speaker #5: And these forecasts go out multiple years. So we feel really good about the investments we're making in Spokane, and we'll continue to accelerate and expand capacity as quickly and safely as we possibly can.

Speaker #2: Great, thanks for that. And then just as a follow-up, I think the corporate came in a little bit lower than what we were expecting.

Arun Viswanathan: Great. Thanks for that. Just as a follow-up, I think the corporate came in a little bit lower than what we were expecting. How are you looking at that now for the full year? Is that a result of some optimization and productivity actions that you're taking, and do you see line of sight to some more of those opportunities as well to reduce corporate expense? Maybe just comment on that. Thanks.

Speaker #2: How are you looking at that now for the full year? And have you guys is that a result of some optimization and productivity actions that you're taking?

Speaker #2: And do you see line of sight to some more of those reduce corporate expense or maybe just comment on that? Thanks.

Speaker #6: Yeah, so for the first half, the team has done nestled terrific job in terms of cost management of our corporate functions. Also, I'd say that we've as David mentioned in his opening comments, we've we're largely through the TSAs at this point.

Tina Pierce: For H1, the team has done an absolutely terrific job in terms of cost management of our corporate functions. Also I'd say that we've, as David mentioned in his opening comments, we're largely through the TSAs at this point. Q2 was particularly heavy in that regard, but we have the most significant ones behind us at this point. As we look forward, we've said it's going to be roughly $60 million per quarter. Now, with that being said, with the integration with ESI, we will obviously be looking at all of that spend and see if it's better spent and whether we can scale it in a much more significant way. Right now we're forecasting at $60 million per quarter. We're going to be very prudent in our cost in H2 as we were in H1.

Speaker #6: Second quarter was particularly heavy in that regard. But we have the most significant ones behind us at this point. As we look forward, we've said it's going to be roughly 60 million per quarter.

Speaker #6: Now, with that being said, with the integration with ESI, we will obviously be looking at all of that spend and see if it's better spent and whether we can scale it in a much more significant way.

Tina Pierce: Now, with that being said, with the integration with ESI, we will obviously be looking at all of that spend and see if it's better spent and whether we can scale it in a much more significant way. Right now we're forecasting at $60 million per quarter. We're going to be very prudent in our cost in H2 as we were in H1.

Speaker #6: But right now, we're forecasting at 60 million per quarter. But we're going to be very prudent in our cost in the second half as we were in the first half.

Speaker #3: Thank you. Our next question is coming from Pete Osterland from Truist Securities. Your line is now live.

Operator: Thank you. Our next question is coming from Pete Osterland from Truist Securities. Your line is now live.

Speaker #8: Hey, good morning. Thanks for taking the questions. So, first, I just wanted to ask about portfolio optimization. Are you actively exploring potential non-core divestitures, and are there any businesses in particular that might be non-core but would be difficult to sell due to dissynergies involved with the separation?

Pete Osterland: Hey, good morning. Thanks for taking the questions. First, just wanted to ask about portfolio optimization. Are you actively exploring potential non-core divestitures? Are there any businesses in particular that might be non-core but would be difficult to sell due to dyssynergies involved with the separation? I guess, broadly, how are you thinking about the portfolio at this stage?

Speaker #8: I guess, broadly, how are you thinking about the portfolio at this stage?

Speaker #5: Okay, good morning. Thanks for the question. When we spun out of Honeywell, we laid out a long-term strategic plan to our board on the portfolio and being really a leader in these secular go-trends with a strong right to win and value proposition.

David Sewell: Pete, good morning. Thanks for the question. When we spun out of Honeywell, we laid out a long-term strategic plan to our board on the portfolio and being really a leader in these secular growth trends with a strong right to win and value proposition. With that, the first step of that was the Advanced Electronics segment. We just felt so strongly about it and the new infrastructure that's needed around AI, literally over the next decade plus. We just see that growth so strong. When you tie in our core capabilities around synthetic chemistry and our refrigerants business, our flooring business, and our electronics, we just think that, along with nuclear, just was such a great core for those secular growth trends. As we've talked about, we love the businesses we're in.

Speaker #5: And with that, the first step of that was the advanced electronics segment. We just felt so strongly about it. And the new infrastructure that's needed around AI literally over the next decade plus.

Speaker #5: I mean, we just see that growth so strong. And when you tie in our core capabilities around synthetic chemistry and our refrigerants business, our flooring business, and our electronics, we just think that along with nuclear just was such a great core for those secular growth trends.

David Sewell: When you tie in our core capabilities around synthetic chemistry and our refrigerants business, our flooring business, and our electronics, we just think that, along with nuclear, just was such a great core for those secular growth trends. As we've talked about, we love the businesses we're in.

Speaker #5: As we've talked about, we love the businesses. We're in. We think it's a little premature to start talking about the portfolio. But we will certainly continue to optimize where we think it's appropriate as moving forward.

David Sewell: We think it's a little premature to start talking about the portfolio, we will certainly continue to optimize where we think it's appropriate as moving forward. If you think about the financial profile of our company, where we want to go and really be a differentiated advanced materials company, that's just so powerful in what we can provide our customers. We think we have a great portfolio that does that, we'll certainly continue to look at optimizing in the future as any company would as you look forward.

Speaker #5: But if you think about the financial profile of our company, where we want to go, and really being a differentiated advanced materials company, that's just so powerful in what we can provide our customers.

Speaker #5: We think we have a great portfolio that does that, but we'll certainly continue to look at optimizing in the future. As any company would, as you look forward.

Speaker #4: Pete, this is Mike. I would just add the one other caveat on top of what David said. Just as a reminder, as part of our tax-free spin-off from Honeywell late last year, there is some guardrails in the very near term around what we can do from a portfolio optimization standpoint.

Mike Leithead: Pete Osterland, this is Mike Leithead. I would just add the one other caveat on top of what David Sewell said. Just as a reminder, as part of our tax-free spinoff from Honeywell late last year, there is some guardrails in the very near term around what we can do from a portfolio optimization standpoint. Just keep that in mind as well.

Speaker #4: So just keep that in mind as well.

Speaker #8: Understood. Thank you. And then just as a follow-up, you called out some raw material inflation baked into your expectations for the second half. Any specific inputs where inflation is most significant for you right now and for which businesses are you seeing the greatest need to push through higher pricing in order to maintain your margins?

Pete Osterland: Understood. Thank you. Just as a follow-up, you called out some raw material inflation baked into your expectations for H2. Any specific inputs where inflation is most significant for you right now? For which businesses are you seeing the greatest need to push through higher pricing in order to maintain your margins?

Speaker #5: Well, I would say I'll make a comment and certainly turn over to Tina. We do pass through anything on our precious metals. So that's a straight path through.

David Sewell: Well, I would say I'll make a comment and certainly turn over to Tina Pierce. We do pass through anything on our precious metals, that's a straight pass-through. As we see inflation in that area, we are able to pass that through to customers. Obviously, you see some poor inflationary areas in diesel fuel, transportation. I would say one of the biggest areas we're seeing inflation is sulfur in our refrigerants business. That has had an impact, the team has done a great job ensuring they're able to secure price to offset that inflation.

Speaker #5: So as we see inflation in that area, we are able to pass that through to customers. Obviously, you see some core inflationary areas in diesel fuel, transportation, but I would say one of the biggest areas we're seeing inflation is sulfur in our refrigerants business.

Speaker #5: That has had an impact, but the team has done a great job ensuring there was able to secure price to offset that inflation.

Speaker #6: And then, yeah, that's exactly right. I would say good execution in covering our price-cost in the second quarter, and we anticipate the same for the remainder of the year.

Tina Pierce: Yeah, that's exactly right. I would say good execution in covering our price cost in Q2, we anticipate the same for the remainder of the year.

Speaker #3: Thank you. We reached the end of our question-and-answer session. I'd like to turn the floor back over to Mike for any further closing comments.

Operator: Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over to Mike for any further closing comments.

Speaker #4: Great. Well, look, really appreciate everybody joining us on quite a busy morning. If you need anything else or if you'd like to follow up, please reach out to myself or the investor relations inbox and always happy to spend some time to chat through.

Mike Leithead: Great. Well, look, really appreciate everybody joining us on quite a busy morning. If you need anything else or if you'd like to follow up, please reach out to myself or the investor relations inbox, and always happy to spend some time to chat through. Appreciate it and have a good day.

Speaker #4: So appreciate it and have a good day.

Speaker #3: Thank you. That does conclude today's teleconference and webcast. Let me disconnect your line at this time and have a wonderful day. We thank you for your participation today.

Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.

Q2 2026 Solstice Advanced Materials Inc Earnings Call

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